UK regulator sanctions GFG auditor over independence failures

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UK sanctions GFG auditor

Highlights

The Financial Reporting Council fined King & King £52,000 and Milankumar Patel £326,184 for breaching independence standards in over 140 GFG audits from 2018 to 2020.
King & King is removed from the audit register for five years and barred from high-turnover clients for two years, while Patel is banned from statutory audits for three years.
The case increases regulatory scrutiny of GFG Alliance and spotlight on UK audit sector risks, especially auditor independence and revenue concentration among smaller firms.

FRC findings and penalties

As reported by the Financial Reporting Council, King & King and engagement partner Milankumar Patel concealed what the regulator called clear self-interest threats across more than 140 audits of GFG entities between 2018 and 2020. The sanctions relate to audits of Liberty Specialty Steels, Alvance British Aluminium, Liberty Steel Newport and Liberty Performance Steels.

The FRC said the firm, then a six-partner practice, depended on GFG entities for revenue, undermining its independence and objectivity. It also said the audits failed to meet requirements on planning and risk assessment, income and expense recognition, and going-concern and financial statement disclosures.

Patel, who the regulator said made nearly 877,500 pounds in pre-tax profits from GFG audits over two years, is fined a total of 326,184 pounds, receives a severe reprimand, is barred from statutory audit work for three years and loses his responsible individual status for two years. King & King is fined 52,000 pounds, is removed from an audit register for five years, is barred from taking on high-turnover clients for two years, and is ordered to undergo external monitoring and ethical compliance training.

Some of the penalties are reduced by 25% because of early settlement. King & King and GFG do not immediately respond to requests for comment.

Broader pressure on GFG and UK audit sector

The enforcement action adds to the pressure surrounding GFG Alliance, Gupta's metals group, which has faced sustained scrutiny since the collapse of its main lender, Greensill Capital, in March 2021 triggered a rush to refinance. Two months later, the UK Serious Fraud Office opened an investigation into suspected fraud, fraudulent trading and money laundering.

GFG denies wrongdoing and said last year that it reached an agreement with Greensill creditors on terms for a global debt settlement. For the UK audit market, the case highlights regulatory focus on auditor independence, client concentration risk and whether smaller firms can maintain adequate safeguards when large mandates account for a significant share of revenue.

Our earlier coverage of the Financial Reporting Council’s sanctions against King & King and managing partner Milan Patel explained how the regulator found serious independence breaches in audits of several GFG Alliance companies in 2019–2020. We noted that heavy fee dependence on GFG entities was central to the case, triggering fines, multi-year bans and restrictions that underscored wider concerns about client concentration risk in the UK audit sector.

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